Region's homes becoming less affordable

Experts worry that the widening gap could ultimately derail the market's recovery

By JOSH SALMAN

Southwest Florida housing is now less affordable than it was at the onset of the Great Recession — and experts see the problem worsening.

A robust housing recovery is primarily to blame, fanned by a recent surge in investor buying and pent-up demand from retirees.

But the region's job market also is a contributing factor, experts say, because wages have largely failed to keep pace with housing appreciation — leaving retail workers, teachers and single mothers, especially, dedicating a greater portion of their pay to housing.

At the same time, rising mortgage interest rates and apartment rents are climbing to decade highs and compounding the problem, experts note.

Economists fear that the widening affordability gap could ultimately derail the housing recovery because it is edging some young professionals and lower-income families out of the market. That, in turn, could chill the cycle of move-up buyers for years to come.

“The available housing stock is in a higher price range than it has been the last four or five years, and that's a ding on affordability,” said John Tuccillo, chief economist at the Florida Realtors trade group. “But median incomes also are down, and that's another ding on affordability.

“This is a real issue.”

Less affordable

Based on an index that measures median home prices against family wages, Southwest Florida is among a growing number of metro areas nationwide where housing has become considerably less affordable.

For the North Port-Sarasota-Bradenton area, 64.3 percent of new and existing homes sold from Jan. 1 to March 31 were affordable to families earning the region's median family income of $57,300, according to data released Tuesday by the National Association of Home Builders.

That Housing Opportunity Index is down from 67.8 percent in the fourth quarter of 2013, and 74.9 in the initial quarter of last year.

The index is a measure of housing affordability based on government household earnings estimates, homes sales collected from court records and mortgage financing conditions as reported for specific areas by the Federal Housing Finance Agency.

Southwest Florida's affordability index has steadily declined since late 2011, slipping to its lowest level since the third quarter of 2008, records show.

The slide occurred as median home prices in Southwest Florida rose to $165,000 last year. Median family incomes in the area, meanwhile, fell by $2,600 during the first three months of this year to $57,300 — their lowest level since late 2005.

In all, housing in 172 other cities nationwide is now considered more affordable than in the Sarasota-Bradenton area.

“Your first responders, your teachers and your police are now having a hard time finding housing in Sarasota,” said Rose Quint, assistant vice president of survey research for the National Association of Home Builders. “This is the pattern a lot of the metropolitan statistical areas have seen.”

Tougher to attain

Real estate in Southwest Florida remains more affordable than during the real estate bubble of the mid-2000s, with housing here only slightly less affordable than the national index average of 65.5 percent.

But if homeownership becomes even tougher to attain for middle-class families, it could cause a sharp drop in home sales, further increase apartment rents and even prompt job losses in sectors tied to housing, like construction, analysts warn.

The problem is especially acute in areas like Southwest Florida, where wages are traditionally tied to lower paying service industries such as tourism, health care, retail and agriculture.

As a result, working families are forced to compete with baby boomers who have migrated to Florida for retirement homes after waiting out the Great Recession, and investment giants like Wall Street's Blackstone Group that are buying foreclosures for rental conversions.

“This is the story of Sarasota and Manatee,” said Pat Neal, the head of Neal Communities, a prolific area homebuilder. “We had about five years of good affordability, and that door is about to close again.”

Although Neal strives to offer a mix of home price points, about 80 percent of his firm's houses are sold to empty nesters and active adults without children.

Neal's more modest homes, which are aimed at families and young professionals, have increased in price from roughly $106,900 in 2009 to about $160,000 today.

Neal also believes the area's affordability problem will get worse before it gets better, the result of stagnating wages and a continued rise in home prices.

So does Sarasota landlord Harvey Vengroff, whose portfolio of 1,000 lower-income rentals is full with a growing waiting list.

“Everyone needs a place to live, but the people who work for a living just can't afford it right now,” Vengroff said.